ICRA projects net loss of INR 2-3bn in FY25 & FY26 for aviation sector

Despite rise in passenger numbers and steady growth in air traffic, the Indian aviation industry is expected to report a net loss of INR 2000-3000 crore in FY25 and FY26 as per the latest report by Investment Information and Credit Rating Agency (ICRA). The report attributes the losses to to pressure on ticket prices as airlines aim to maintain healthy passenger load factors (PLF) despite high aviation turbine fuel (ATF) prices. The industry is also expected to see a slow recovery in earnings due to its high fixed costs.

Interestingly, Indian aviation sector recorded a new profit of INR 1600 crore in FY24.

Another major challenge for airlines is rising borrowing costs. “The scheduled delivery of new aircraft will increase lease liabilities, adding to the interest burden,” report adds.

The projected losses for the coming years are much lower than the INR 23,500 crore recorded in FY22 and INR 17,400 crore recorded in FY23

Despite financial challenges, the industry's debt levels are expected to remain stable, with an interest coverage ratio of 1.5-2.0 times in FY25. This suggests that airlines will still have some ability to manage their debt obligations.

"The pace of recovery in industry earnings is likely to be gradual, owing to the high fixed cost nature of the business,” The report adds.

On the positive side, domestic air passenger traffic has shown strong growth. In January 2025, passenger traffic grew by around 14.5% year-on-year and was nearly 17.9 per cent higher than pre-Covid levels. This indicates a steady demand for air travel, which could support the industry's long-term recovery.

The steady rise in air travel demand and strategic financial management by airlines might help the airlines to tide over this temporary profitability issues